Where many sectors may witness recovery in profits in 2QFY21 (Oct-Dec 2020) as the economic activity rebounded and they came out of the COVID-19 restrictions, the oil and gas exploration and production sector will be under duress due to the continuing weak crude oil prices, subdued hydrocarbon exploration and production activity, and also currency appreciation in the quarter. Pakistan Oilfields Limited (PSX: POL) announced its 2QFY21 financial performance yesterday depicting just that. While the company announced an interim cash dividend of Rs20 per share, revenues and earnings slithered.
The E&P company’s revenues during the latest quarter dropped by 20 percent year-on-year due to decline in hydrocarbon growth and also weak oil prices. Crude oil and natural gas production were down by 4 and 7 percent year-on-year, respectively; while the realized oil prices were down by around 30 percent year-on-year during 2QFY21.
Slower exploration and production activity is visible from 92 percent decline in exploration and production activity, while a significant decline in other income came from currency appreciation. POL’s earnings in 2QFY21 declined by 34 percent year-on-year as a result with a significant decline in net margins despite a decline in topline.
2QFY21 has actually proven to be even weaker than 1QFY21 for POL as earnings decline in 1QFY21 was much slower (8% YoY). Also, sequentially, POL’s revenues in 2QFY21 were lower by 5 percent, while profit after tax was down by 17 percent quarter-on-quarter.
Overall, 1HFY21 topline for POL slipped by 1 percent year-on-year, where the decline in production volumes stood around 3 and 5 percent for oil and gas respectively, and oil prices on realized basis declined by 25 percent year-on-year.